This is the 3rd big managed care company (Aetna, Wellpoint, Cigna) to decide to create this type of long term relationship with one of the big PBMs. They each picked a different one. (Aetna/CVS, Wellpoint/Express, Cigna/Catamaran) United brought their business in-house from Medco, and Humana has continued to expand their pharmacy business.

Eric Elliott (former head of Cigna’s PBM and now head of Prime Therapeutics PBM) and Dan Haron (current head of Cigna’s PBM) are both very smart executives who I believe saw lots of value in the integrated PBM story.

So, if I read between the lines here, I come to a few quick thoughts:

Are they all structuring long term deals that get them through this reform period and minimize risk, but give them the chance to bring this back in house after this settles down?

Could this symbolize a further repositioning and commoditizing of the PBM industry that all of these companies want to retain marketing, engagement, strategy, and formulary but outsource call center, operations, contracting, network management, and other tasks? Would this further accelerate a “race to the bottom” on price that I’ve talked about before?

Does this have implications to specialty pharmacy? Will that become split into two different businesses – operations versus clinical care? (more on that later)

I don’t know the bidding here, but scale used to matter a lot. If CVS and Express Scripts didn’t aggressively bid for this contract, that might imply a point of diminishing returns in terms of scale. (which I clearly believe exists)

Under what circumstances does the integrated model work (i.e., what does Humana, United, and Kaiser see differently) or will all the payers look to outsource certain tasks to the big PBMs?

The interesting times in the industry continue. It’s a head scratcher of what comes next!